Container plans of the Far East

This week the authorities of the Primorie Territory have announced their intent to continue active development of container transportation at the Far East through construction of five new container terminals in the south of Primorie. Besides, they also plan a modernization of existing transshipment facilities, the throughput of which grew by over one third in 2007. Experts say there are perspectives for the development though the main problem hindering improvement of container transportation is poor infrastructure and high cost of container handling operations.

According to the report of Primorie press center, container capacity of Primorie is 400,000 containers per year. Sergei Darkin, the Governor of the Primorski Territory, says it is necessary to increase the capacity to 2 millions by 2012 (5-fold). The task of new container terminals is to make the region a large international logistics center linking APR and Europe.

Primorie Administration says one of the largest logistics complexes is to be built nearby Novy village. Yuzhny Primorski Terminal will function as a “dry port” to ensure smooth operation of marine and railway transport. In Zarubino village it is planned to build a marine transshipment complex Troitsa. Moreover, a container terminal and a logistics center are to be built near Vostochny port. This project envisages a comprehensive development of the region’s railway infrastructure and highway network. Beside, the port’s Vostochny Container Terminal will serve a basis for construction of two new berths, while the facilities for handling of large capacity containers will be built on the basis of Commercial Port of Vladivostok OJSC.

As of today, the leading position in terms of container throughput is held by the terminals of the North-Western region handling the major flows of containerized import. However, the development of container transportation is an international trend which cannot but involve the Far Eastern region. In 2007, Primorie handled over 600,000 TEU. It is necessary to note that earlier coastal trade cargo was the core of container throughput in the Far East while today there is a tendency towards the increase of export and import flow.

The largest container terminal in the Far East is Vostochnaya Stevedore Company (VSC LLC) operating at the territory of Vostochny port. It is comanaged by Dubai Port World (on the largest port operators in the world) and N-Trans group of companies (former Severstaltrans). In 2007, throughput of VSC totaled 370,992 TEU (+27%, year-on-year). Handling of both import and export cargo increased while transshipment of transit containers fell by 70%. Thus, import accounted for 58.6% of total throughput, export - 37%, coastal trade cargo 3.6%, transit - 0.8%. According to VSC CEO John Skurtis, in 2007 the company reached a record-high throughput in the history of container handling at the territory of Vostochny port. In 2007, VSC started implementation of an investment program for the terminal development, which is to be continued in 2008 as container throughput grows.

According to the press center of Commercial Port of Vladivostok OJSC, the company increased container throughput by 40% in 2007 to 223,500 TEU. The highest volumes were handled by Vladivostok Container Terminal (VCT LLC) co-managed by Commercial Port of Vladivostok and N-Trans Group of Companies. In 2007, VCT handled 199,651 TEU (+36%, year-on-year, against 147,100 TEU in 2006). According to Valeri Mestulov, VCT Director General, the optimization of production processes enabled the company to exceed both the results of the previous years and the declared capacity of the terminal.

One of the largest terminals to be developed in the nearest future in Vladivostok is the joint project of Commercial Port of Vladivostok and N-Trans Group of Companies. The investments into a 100,000-TEU terminal were valued at RUR 917.6 million.  Commercial Port of Vladivostok is to invest into infrastructure while N-Trans - into equipment. N-Trans management said the terminal is to be put into operation in August 2008. The terminal is to be operated by the partners’ subsidiary Vladivostok Container Service LLC. However, in early 2008 a conflict blazed up as regards cancellation of lease agreement between Vladivostok Container Terminal (VCT LLC) and Commercial Port of Vladivostok. The case is being considered by the Arbitrage Court of Primorie making the project’s prospects unclear.

Another project was announced in autumn of 2007 by Vladimir Yakunin, President of Russian Railways OJSC. According to Mr. Yakunin, the company decided to build its own container terminal at the territory of Vostochny port after it failed to purchase a share in either of the existing terminals. Experts think the main competitive advantage here is a reliable link between the port and its infrastructure being held by the same company.

However, experts think there is still a potential for further development of the existing terminals. It is also should be noted that Chinese ports continue the development and the option of direct railway transportation from China to Russia is of high priority today. For example Deutsche Bahn plans to launch a regular container link Peking-Hamburg by 2010. In January 2008, the company made a demonstration. Anyway, one train may carry 90 TEU, while modern vessels have the capacity of 10,000 TEU. Experts forecast container turnover is to continue its growth in the Far Eastern region and investors express there interest in expansion of their terminals, which is to contribute to the region’s development.